If he invests the $$3,000$ today, the terminal value of this initial investment in $5$ years $($earning an average $5\%$ return$)$ will be $$ This means that he must accumulate the remaining $$ through his annual savings plan to obtain the full $$25,000$ to cover his expenses for the year. Still assuming an average return on investment of $5\%,$ the additional yearly investment required to reach Paolo's targeted financial goal within $5$ years is $$

Suppose instead that Paolo had no capital saved and thus needed to accumulate the entire $$25,000$ in the next $5$ years. In this case, his annual contribution would have to be $$

When Paolo starts with an initial investment of $$3,000,$ the total amount that he ends up contributing to accumulate $$25,000$ is equal to the initial investment plus the additional yearly payments, for a total of $$ When he starts with no initial capital contribution, the amount he ends up contributing is equal to the sum of all annual contributions you calculated in the no$-$initial$-$capital scenario, for a total of $.$

Once Paolo has determined the annual amount he needs to save, the next step toward achieving his goal is coming up with an investment plan.

True or False: The appropriate investment plan depends only on the total amount of money he intends to save, not on the investment objective.

$$ True

False

Continue without saving

Future Value Annuity Factors

Formula

Excel

$\backslash$table$[[$Year$,2\%,5\%,8\%,10\%$